My husband was a contractor and we have now received a letter from FS capital. We are currently in negotiations of settling with HMRC. However, what I don’t understand is - who took all my husbands hard earned money & turned into loans that they now want back? We can’t get our heads round it. Did my husband work for nothing in reality?! How is this legal?! Feel totally lost & don’t know where to turn!
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This is a good place to turn. Expect more helpful answers shortly. Don't despair.
Down with racism. Long live miscegenation! -
If you have a letter from FS Capital, then your husband used either or both of K2 or Hyrax schemes.Originally posted by Vermicelli View Post
These worked by your husband doing his 8 hours a day at the end client, who was then billed - probably by an agency.
The end client passed money to the agency who in turn passed it to K2/Hyrax who supplied their employee (you husband) to the end client.
The employer (K2/Hyrax) made two payments to your husband.
One was a salary that was taxed at source and he received a net value.
The other was a loan. This was claimed to be non taxable (or at least attracted tax only on the benefit of the loan, usually the difference in interest between a normal commercial loan and the actual rate charged on the loan).
The claim that it was not remuneration was made by K2/Hyrax but is contested by HMRC.
The loan was later transferred out of the K2/Hyrax employer company and has since moved around a couple of trusts and trustees (Praxis and Pinotage) and in late 2019 was acquired by FS Capital from the latter trustee.
In order to facilitate this arrangement, you husband would have signed a loan agreement. It would also have been obvious at the time because his effective tax rate on receipts via the arrangement would have been very low (less than 5% perhaps).
The reality was that for every £100 the end client paid, the tax going to HMRC would have been perhaps £1 or £2. If you husband had received say £80 of each £100, then the balance (£18/19) would have gone to K2/Hyrax in fees.
HMRC is contesting the fact that the loan is claimed to be non taxable. They have already won a case that the scheme should have been disclosed to them (and was not). The consequence of that will be that HMRC is able to issue a demand for the tax that they claim was due (and which has not been paid) if (and it's usually a big if) they had opened an enquiry into the year(s) your husband used the scheme. This is called an APN (Accelerated Payment Notice) and whilst many have tried to challenge them via the Courts, none have succeeded in having them stopped, in the conditions have been met.
Chances are if your husband has years under enquiry, then an APN will be on its way soon.
In the meantime, FS Capital has the loan. They claim that they can ask for repayment of that loan.
Last Friday they put out a notice to that effect along with the fact that two groups of K2/Hyrax users will be placed into a further period of "no action".
Our group of clients (WTT) is one of them. We have a clear idea of what the next steps should be in order to prevent both a recall of the loan and/or a tax charge applying.
You and your husband need to get advice.
Advice on the liability (or not) to repay the loan and advice on the tax situation.
Clearly we can help and equally clearly there are other advisers out there. It was the case the you could deal with the tax and the loan situation separately. In this situation however I suggest you cannot and that you need a coordinated strategy. That reduces the pot of potential advisers - a lot.
Hope this helps.Best Forum Adviser & Forum Personality of the Year 2018.
(No, me neither).Comment
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Thank you - you have made things very slightly clearer but I still dont understand why these "loans" need paying back or writing off when my husband earned it and if we settle with HMRC? I feel like we have been totally let down by our accountant who has literally said "good luck with sorting it out" when we followed his advise all along. We just didnt understand what we were getting into. Anything to do with tax, accountancy - you might as well talk to us in a foreign language. Do we just ignore FS capital? Who are you - if we need to get proper advice?
Just dont know who to trust anymore and my husband is in a really dark place.Comment
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Your husband earned money for K2/Hyrax.Originally posted by Vermicelli View Post
he was in turn paid by K2/Hyrax. He was however paid a small taxable amount and larger amount that K2/Hyrax claimed at the time (and perhaps still do - I don't know) was not taxable.
The larger amount, in order to be non taxable had to in a different legal form. In this case a loan.
HMRC disagrees with the tax treatment applied at the time but have spent 10 years trying (not very hard) and failing to bring a case to prove that. This has allowed many of the employers in such schemes to disappear. Faced with this HMRC has chosen to chase the weakest link in the chain - your husband for the tax.
All of the tax issues however do not really impact the loan. your husband signed an agreement. It has consequences. you now have to deal with them.
"We" are WTT. We are tax advisers in this space. We have also taken steps to prevent any immediate action from FS Capital in terms of recalling loans. There is a moratorium in place until mid March by which time, hopefully, matters will be clearer.
I'm happy to call you and explain the position. You can PM me via this site or call our switchboard and ask our receptionist to book you an appointment with me (Graham). The first call is free, no obligation.
(It may be that the PM is not active - I think you have to do 5 posts before it appears).Best Forum Adviser & Forum Personality of the Year 2018.
(No, me neither).Comment
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PM sent.Comment
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Thank you for the responses - you have been so kind and helpful.Comment
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My husband also caught up with FS Capital loan repayment request
My husband is in a similar situation. He has been contacted by FS Capital giving options for loan repayment. He has also been contacted by Peak to join their loan association however he would like to speak to WTT to discuss options - can he call WTT and ask for a call back also. We are at a bit of a loss as what to do at this stage. ThanksOriginally posted by webberg View PostComment
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See https://www.contractoruk.com/forums/...-nutshell.html for the options - you can definitely call WTT up and organise a call back.Originally posted by jog2001 View Postmerely at clientco for the entertainmentComment
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Yes he can. Google them to find the phone number.Originally posted by jog2001 View Post"I can put any old tat in my sig, put quotes around it and attribute to someone of whom I've heard, to make it sound true."
- Voltaire/Benjamin Franklin/Anne Frank...Comment
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